The 2008 financial crises started in the US and can be explained when more than 1 million homes went into foreclosure during a timeline that was unpredictable for any economy to sustain.
Unemployment numbers were on the rise as the economic crisis struck financial institutions with historic proportions. The US government took over mortgage lenders Fannie Mae and Freddie Mac. As a result, several banks and investment firms were bankrupt or bought by other companies at well below their market value.
The crisis came to a head in late September 2008 as the world financial markets, including the New York Stock Exchange and the NASDAQ, depleted retirement accounts for millions of people. The Dow Jones Industrial Average was down 20 percent and problems then spread across the entire world, including Europe and Asia.
Timeline Economic Crises
June 5, 2008: More than 1 million homes in foreclosure.
September 7: U.S. Government seizes Fannie Mae and Freddie Mac.
September 14: Bank of America buys Merrill Lynch.
September 15: Lehman Brothers declares Bankruptcy.
September 16: U.S. Government gives 85 billion-dollar loan to the insurance company AIG.
September 19: The Bush Administration announces bailout plan.
September 29: Bailout plan rejected by U.S. House of Representatives.
September 29: Dow begins the decline, drops 777.68 points.
October 3: Emergency Economic Stabilization Act (2008) passed.
An increase in high-risk mortgages caused numerous homeowners to default on their loans in record numbers. The default numbers caused a sub-prime mortgage crisis in which mortgage-backed securities rapidly lost value. Several lenders and banks had invested heavily in these financial securities and could not absorb those losses.